The initiative seeks to avoid duplication in the payment of taxes and also to prevent tax evasion of income and estate taxes.
On november 15, 2023, the Senate unanimously approved the agreement between Chile and the United States amending the “Agreement to Avoid Double Taxation and to Prevent Tax Evasion in Relation to Income and Property Taxes and its Protocol.”
Thus, in accordance with the provisions of Article 29 of the Agreement, its entry into force began on January 1, 2024 after the United States Department of the Treasury notified Chile.
This is a fact that will undoubtedly favor the commercial exchange between the two countries. Among its main tax implications we can find the following:
- Capital gains: The rate is reduced from the current 35% to 16%, provided that the alienator has not owned more than 50% of the capital of the company residing in Chile within the 12 months preceding the alienation.
- Interest: The maximum rates currently in force are limited (Chile 35%, United States 30%). The maximum rate will be 10% as a general rule and may reach 4%. However, during the first two years of the Agreement’s validity, it will be a rate of 15%.
- Dividends: A maximum rate of 5% is established if the beneficiary of the dividends is a company that owns at least 10% of the voting shares of the company that pays the dividends and 15% in other cases. In the case of Chile, given our semi-integrated system, the maximum rate will not apply to the extent that the First Category Tax can be fully used as a credit and the Additional Tax rate does not exceed 35%.
- Use of credits: The corporate tax paid or withheld in the United States may be used as a credit in Chile.
- Information exchange: A mechanism for requests and information exchanges is contemplated.
It is important to note that the reduction of withholding taxes associated with amounts paid or accrued will begin to take effect on february 01 of this year.
Download One Page on the Double Taxation Agreement between Chile and the USA
For more information on these topics you can contact our Tax team:
Rodrigo Albagli | Partner | ralbagli@az.cl
Álvaro Rosenblut | Partner | arosenblut@az.cl
David Ancelovici | Director Tax Group | dancelovici@az.cl
Pablo Trucco | Senior Associate | ptrucco@az.cl
Elisabet Pinto | Associate | epinto@az.cl
Valentina Herrera | Associate | vherrera@az.cl
